Core views

The company achieved revenue of 300 million yuan in 2023Q3, a year-on-year decrease of 26.65%. Q3 revenue declined due to unconfirmed receipt of some projects; net profit of 22 million yuan, a year-on-year decrease of 53.19% over the previous year. Reduced gross margin combined with lower expenses put pressure on industry performance in the short term. The company's contract debt at the end of 2023Q3 was 119 million yuan, an increase of 102.68% over the previous year. The new orders signed are in good condition, and the orders in hand are full. On November 10, 2023, the company announced the 2023 employee stock ownership plan, setting goals for R&D and 2023-2025 performance, improving corporate governance capabilities, and demonstrating confidence in subsequent development.

occurrences

The company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved operating income of 1,072 million yuan, an increase of 11.61% over the previous year; net profit of 99 million yuan, a decrease of 9.85% over the previous year; and net profit after deducting non-return mother's net profit of 93 million yuan, a year-on-year decrease of 8.91%. Q3 achieved operating income of 300 million yuan in a single quarter, a year-on-year decrease of 26.65%; net profit of 22 million yuan, a year-on-year decrease of 53.19%; net profit after deducting non-return net profit of 19 million yuan, a year-on-year decrease of 58.46%.

Brief review

Performance is under pressure in the short term, and there are plenty of orders in hand

The decline in Q3 revenue was affected by the unconfirmed receipt of some projects, and the decline in gross margin combined with the cost ratio put pressure on industry performance in the short term. Demand from downstream customers continues to be strong. The company continues to enhance its core competitiveness and industry influence, and actively develops related businesses. In the first three quarters, the company achieved operating income of 1,072 million yuan, an increase of 11.61% over the previous year; in Q3 alone, it achieved revenue of 300 million yuan, a year-on-year decrease of 26.65%, mainly due to the fact that some major projects were in the production and execution stage and did not meet the revenue recognition conditions. In terms of profitability, the gross profit margin and net profit margin of 2023Q3 companies were 25.93% and 7.43% respectively, compared to -2.17 pct and -4.21 pct, respectively.

On the cost side, 2023Q3 achieved a period expense ratio of 17.81%, compared to +3.57pct, of which the sales, management, R&D, and financial expense rates were 6.23%, 5.45%, 5.18%, and 0.95%, respectively, +1.02pct, +2.18pct, -0.74pct, +1.11pct, and +1.11pct respectively. The company increased business development, product development and fixed asset depreciation, and the period cost rate increased.

On the profit side, 2023Q3 achieved net profit of 22 million yuan, a year-on-year decrease of 53.19%; net profit of non-attributable net profit of 119 million yuan, a year-on-year decrease of 58.46% over the previous year. The decline in gross margin combined with rising cost rates during the period, and the company's performance was under pressure in the short term.

Contract liabilities and inventories have increased dramatically, and on-hand orders are plentiful. At the end of 2023Q3, the company's contract debt was 119 million yuan, up 102.68% year on year. The company actively increased market development, new orders were in good condition, orders in hand were full, and advance payments for some projects were accounted for in contract debt accounts; at the end of 2023Q3, the company had an inventory of 704 million yuan, an increase of 163.18% over the previous year, mainly for products and equipment that had completed production but had not yet been handed over to customers during the execution of the project. Subsequently, as the project completed on-site installation, commissioning and delivery, the transformation of project revenue could be realized.

The company announced the 2023 employee stock ownership plan, setting targets for R&D and 2023-2025 performance On November 10, 2023, the company announced the 2023 employee stock ownership plan. The total amount of capital it plans to raise is no more than 39.2875 million yuan, using “shares” as the subscription unit, each share is 1.00 yuan. The share source is the company's share repurchase. The total number of shares transferred does not exceed 2245 million shares, accounting for 1.80% of the company's current total share capital of 125 million shares. The price of the employee's shareholding plan to buy back the company's shares is 17.50 yuan/share. The participants in the employee stock ownership plan are company employees, including 7 company directors (excluding independent directors), supervisors, and senior managers. The total subscription share does not exceed 11.725 million shares, accounting for 29.84% of the total share of the employee's shareholding plan; the total subscription share of core and key personnel and other personnel deemed to need incentives by the board of directors does not exceed 27.5625 million shares, accounting for 70.16% of the total share of the employee's shareholding plan.

The employee stock ownership plan sets out goals for R&D and 2023-2025 performance, demonstrating confidence in the company's subsequent development. In 2023, the company mainly emphasized R&D goals, which were SEMI certification and the number of patents for important product lines, respectively. The 2024 and 2025 targets mainly set specific quantitative targets for the company's cumulative non-net profit from 2023-2025 (after excluding all share payment fees involved in equity incentive plans and employee stock ownership plans during the period of validity), demonstrating confidence in subsequent development. This employee stock ownership plan is expected to improve the company's benefit-sharing mechanism, further motivate employees, and improve corporate governance capabilities.

Investment advice

Without considering the impact of the 2023 employee stock ownership plan on subsequent company performance, the company's 2023-2025 operating income is expected to be 15.06, 20.12, and 2,520 billion yuan, respectively, up 13.40%, 33.55%, and 25.26%, respectively, and net profit from 2023-2025 was 1.43, 2.08, and 274 million yuan respectively, up 10.03%, 45.37%, and 31.33%, corresponding to 2023-2025 PE valuations of 30.31x. 20.85x and 15.88x, maintaining the “buy” rating.